There are close to 5,000 mutual funds that can be accessed through the investment window, although participation remains low. Image: Dilok Klaisataporn/Shutterstock.com
By: John Grobe, Federal Career ExpertsYou may recall that, back in May, Senator Marco Rubio (R-FL) introduced bill S. 1650 which, if enacted, would prohibit the TSP from investing in a country (or in any security of concern) that was defined by the Director of National Intelligence in the “Annual Threat Assessment.”
Shortly thereafter, TSP Director of External Affairs, Kim Weaver, said that, if the bill became law, there would be impacts to the I Fund (which is invested in international stocks) and that the mutual fund window would likely be eliminated. This month, the TSP expanded on both the I Fund and the Mutual Fund Window (MFW).
Regarding the I Fund, the Thrift Plan’s press release stated that the I fund does not now, nor has it ever invested in mainland China. Hong Kong does make up a small amount (less than 4% of the I Fund). In fact, no funds within the TSP are invested in companies that the U. S. government has sanctioned through the Office of Foreign Assets Control (OFAC) in the Department of the Treasury. OFAC sanctions companies for activities that pose threats to our national security.
Lurking in the background here is the TSP’s oft expressed desire to change the index followed by the I Fund to a broader based international index (MSCI All World) that tracks more than just the developed markets that are tracked by the current (MSCI EAFE) index. Senator Rubio has been throwing up roadblocks to this desired switch for the last several years and no changes have been made to the index tracked by the I Fund in that time period. Here’s what the TSP’s press release says about that, “The largest publicly traded U. S. companies, top Federal contractors, state pension plans and all six of the largest target date fund providers invest in emerging markets, including China.”
Turning to the MFW, there are close to 5,000 mutual funds that can be accessed through the window. At present all the funds in the MFW comply with SEC and OFAC requirements. If an additional burden is placed on the TSP by forcing it to hew to the standard set forth by the Director of National Intelligence (as opposed to OFAC) it is likely that the TSP would not be able to monitor all the stocks contained within these funds. This might cause the TSP to make changes to or discontinue the Mutual Fund Window.
How likely is it that any of the Rubio-proposed changes will take place? Remember Schoolhouse Rock’s How a Bill Becomes a Law? Just because a piece of legislation is introduced in Congress, doesn’t mean that it’ll become a law. According to the University of Oklahoma, only 4% of bills introduced in Congress ever become law.
The Thrift Savings Plan was originally designed as an investment program that helped federal employees save for their retirement. In the 36 years of the TSP’s existence, many bills that would change the ways our money is invested have been introduced; from banning investments in ESG (environmental, social, and governance), to allowing investments in REITs (Real Estate Investment Trusts). Very few have been enacted into law. The TSP steers a (relatively) steady course, keeping the investment needs of you and me in mind.
Did you know that, since TSP loan program rules were changed a year ago, over 160,000 participants have taken a second general purpose loan (only one was allowed before)?
5 Steps to Protect Your Federal Job During the Shutdown
Over 30K TSP Accounts Have Crossed the Million Mark in 2025
The Best Ages for Federal Employees to Retire
Best States to Retire for Federal Retirees: 2025
Primer: Early out, buyout, reduction in force (RIF)
See also,
OPM Guidance Addresses Pay Issues arising During, After Shutdown
